Andrew Ross Sorkin: Reinstating an Old Rule Is Not a Cure for Crisis

Andrew Ross Sorkin is a financial columnist for the NYT.

Call it the Glass-Steagall myth.

Since JPMorgan Chase announced its surprise $2 billion, and growing, trading loss there have been renewed calls from economists, pundits and politicians to reinstate the Glass-Steagall Act, a Depression-era law that prevented commercial banks from participating in investment banking activities.

Elizabeth Warren, the Democratic candidate for Senate in Massachusetts, sent an e-mail to thousands of her constituents, pressing to bring back the law, which she said, “stopped investment banks from gambling away people’s life savings for decades — until Wall Street successfully lobbied to have it repealed in 1999.”...

The facts — basic facts — just aren’t that convenient. While the repeal of Glass-Steagall has seemingly become the sine qua non of the financial crisis, it is pure historical revisionism....